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ID Protection Services Not Taxable to Victims of a Data Breach

In Announcement 2015-22, the IRS announced that the value of identity protection services, such as credit monitoring, identity theft insurance policies, and identity restoration services, provided to an employee whose personal information may have been compromised in a data breach is not taxable as gross income. The Announcement does not apply to cash received in lieu of identity protection services; identity protection services received for reasons other than as a result of a data breach, such as services received in connection with an employee’s compensation or benefits package; or proceeds actually received under an identity theft insurance policy. Announcement 2015-22 is available here.

HHS Requests Comments for Transparency Reporting for Qualified Health Plans; Transparency Reporting for Non-QHPs and Non-Grandfathered Plans to be Proposed Later

The U.S. Department of Health and Human Services (“HHS”) recently issued a request for comments on the transparency provisions of Section 1311(e)(3) of the Affordable Care Act (the “ACA”), which requires issuers of qualified health plans (“QHPs”) to submit and make available transparency in coverage data. The proposed data collection would collect information from QHP issuers in federally facilitated exchanges under the ACA. Separately, HHS, the U.S. Department of Labor, and the Treasury (collectively, the “Departments”) issued a notice of their intent to propose transparency reporting for non-QHP issuers and non-grandfathered group health plans in the future. The requirements for such reporting may differ from the information requested for QHPs. HHS’ request for comments is available here. The Departments’ joint notice is available here.

Texas Supreme Court Holds That EPA Superfund Cleanup Proceedings Under CERCLA Constitute A “Suit” Triggering A Duty To Defend

In McGinnes Indus. Maintenance Corp. v. The Phoenix Ins. Co., No. 14-0465 (Tex. 2015) a sharply divided Texas Supreme Court held that the undefined term “suit” in standard form commercial general liability (“CGL”) policies issued in the 1960s includes superfund cleanup proceedings instituted by the Environmental Protection Agency (“EPA”) pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), even in the absence of a formal lawsuit. The insured in McGinnes operated a waste disposal business.  The insured released waste products into disposal ponds during the 1960s. In 2005, the EPA undertook an investigation into contamination at the disposal site. The EPA subsequently notified the insured that it was a “potentially responsible party” (“PRP”) and demanded the payment of nearly $379,000.00 in order to clean up the site.  When the insured failed to respond to the demand for payment, the EPA issued a unilateral administrative order directing… Continue Reading

SEC Adopts Dodd-Frank Act Pay Ratio Disclosure Rule

The U.S. Securities and Exchange Commission (the “SEC“) adopted its much-anticipated final rule under Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The rule requires a public company to disclose (1) the median of the annual total compensation of all its employees, except its chief executive officer (“CEO“); (2) the annual total compensation of its CEO; and (3) the ratio of the compensation of its CEO to the median compensation of its employees. Under the rule, a company would only be required to calculate median employee compensation once every three years and generally must include all employees, including part-time, seasonal, and non-U.S. employees. Although the company may choose among methods for calculating compensation, it must disclose the method it uses and must use the same method for calculating both CEO and employee compensation. The rule is effective for the first fiscal year beginning on or after… Continue Reading

Recent Legislation Extends Form 5500 Filing Deadline for Tax Years Beginning in 2016

The recently enacted Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (the “Act“) extends the filing deadline for certain Form 5500 filers for plan years beginning after December 31, 2015. Specifically, for plan sponsors who have obtained an extension to file the Form 5500, the Act increases the extension from 2½ months to 3½ months from the initial deadline. Accordingly, for 2016, a plan sponsor’s deadline for filing the Form 5500 for a calendar year plan, assuming the plan sponsor obtained an extension, would be November 15, 2017 (rather than October 15, 2017). At this point, it is unclear whether a similar extension will apply to direct filing entities, such as master trusts, and to the deadline for filing the Form 8955-SSA. However, the extension has the effect of extending the deadline by which Summary Annual Reports (“SARs“) must be provided, since SARs must be provided within… Continue Reading

IRS Releases Draft Instructions for ACA Reporting Forms

The IRS has released the following draft instruction forms for employers and insurers to use to report certain health coverage information required by the ACA: Instructions for Forms 1094-B (Transmittal of Health Coverage Information Returns) and 1095-B (Health Coverage), which are available here; and Instructions for Forms 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns) and 1095-C (Employer-Provided Health Insurance Offer and Coverage), which are available here.

IRS Issues Additional Cadillac Tax Guidance and Requests Comments

Effective for tax years beginning in 2018, the Affordable Care Act (the “ACA”) imposes a 40 percent excise tax (also known as the “Cadillac Tax”) on any excess benefit provided under any employer-sponsored health coverage in excess of certain statutory thresholds. The IRS and Treasury Department recently released Notice 2015-52 (the “Notice”), which discusses various implementation issues raised by the Cadillac Tax. The Notice addresses issues related to identifying the “covered providers” that are liable to pay the tax, tax consequences where a covered provider is reimbursed for excise tax payments, employer aggregation issues, tax determination periods, notification and payment issues, age and gender adjustments to the statutory limits, and other issues not covered under prior guidance. The IRS is requesting comments by October 1, 2015, and intends to issue proposed regulations following public comment. The Notice is available here.

IRS Announces that Employee Plans Will No Longer Answer Legal Questions via E-mail

The IRS announced that, effective October 1, 2015, Employee Plans (“EP”) will no longer answer technical questions by e-mail. Due to recent staffing changes, EP no longer has the resources to do research and provide answers for legal topics. Instead, the IRS is directing employers to its online resources and recommending that employers request a private letter ruling. A private letter ruling is a written statement that interprets and applies tax laws to a taxpayer’s specific set of facts. The IRS announcement is available here.

The Cost of Compliance: Can A “Sue and Labor” Clause Offset The Price Of Enhanced Government Regulation?

This is the age of government regulation.  Businesses pay millions of dollars each year to comply with ever-increasing regulatory requirements intended to avoid catastrophic loss to persons and property.  While corporate America underwrites the lion’s share of the cost associated with enhanced safety, the benefits are realized primarily by consumers, politicians and insurers.  Yes, insurers.  A dollar spent on preventing loss is a dollar saved by insurance companies. Historically, the economic realities of this inverse moral hazard were addressed in ocean marine insurance policies by the “sue and labor” clause.  If, for example, a ship owner repaired a breach in a vessel’s hull thereby preventing the loss of the ship and cargo, the cost of repairing the hull would be reimbursed under a “sue and labor” clause.  While the earliest “sue and labor” provisions date back as early as the seventeen century, most modern commercial property policies have a “sue… Continue Reading

PBGC Issues Proposed Rule Amending Waivers to Annual Financial and Actuarial Information Reporting

The PBGC issued a proposed rule that codifies existing PBGC guidance on when MAP-21 stabilized rates are and are not taken into account for purposes of PBGC’s regulation on Annual Financial and Actuarial Information Reporting. The proposed rule also limits the reporting waiver that is applicable if the aggregate underfunding of pension plans in a controlled group does not exceed $15 million to controlled groups with fewer than 500 participants. The proposed rule also waives reporting solely due to either a statutory lien resulting from missed contributions of more than $1 million or outstanding minimum funding waivers exceeding the same amount, provided the missed contributions or minimum funding waivers were reported to the PBGC under the PBGC’s reportable event regulations under ERISA Section 4043 by the applicable due date. The proposed rule can be found here.

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